-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B6ptvluLDaaOui1ussy0FXMYi4akX9RDg6RfKlwcgnLNDQXuI8VD9omYXgs20u0E XsozMyiaCjzlSg6FIddFug== 0000950134-01-501556.txt : 20010514 0000950134-01-501556.hdr.sgml : 20010514 ACCESSION NUMBER: 0000950134-01-501556 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEERLESS MANUFACTURING CO CENTRAL INDEX KEY: 0000076954 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT, NEC [3569] IRS NUMBER: 750724417 STATE OF INCORPORATION: TX FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-05214 FILM NUMBER: 1630841 BUSINESS ADDRESS: STREET 1: 2819 WALNUT HILL LN CITY: DALLAS STATE: TX ZIP: 75229 BUSINESS PHONE: 2143576181 MAIL ADDRESS: STREET 1: P.O. BOX 540667 CITY: DALLAS STATE: TX ZIP: 75354 10-Q 1 d87067e10-q.txt FORM 10-Q FOR QUARTER ENDED MARCH 31, 2001 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES -------- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES -------- EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO __________________________. Commission File Number 0-5214 PEERLESS MFG. CO. (Exact Name of Registrant as Specified in Its Charter) TEXAS 75-0724417 ----- ---------- (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 2819 WALNUT HILL LANE, DALLAS, TEXAS 75229 ---------------------------------------- ---------- (Address of principal executive offices) (Zip code) (214) 357-6181 -------------- (Registrant's Telephone Number, Including Area Code) Indicate by check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of May 11, 2001, there were 1,477,492 shares of the Registrant's common stock outstanding. ================================================================================ 2 PEERLESS MFG. CO. AND SUBSIDIARIES TABLE OF CONTENTS
PAGE NUMBER ------ PART I: FINANCIAL INFORMATION. Item 1. Consolidated Financial Statements (Unaudited) Condensed Consolidated Balance Sheets at March 31, 2001 and June 30, 2000........................................................................................ 1 Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2001 and 2000...................................................... 2 Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2001 and 2000............................................................ 3 Notes to the Condensed Consolidated Financial Statements................................................. 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. .................................................................... 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk....................................... 12 PART II: OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds........................................................ 13 Item 6. Exhibits and Reports on Form 8-K................................................................. 13 SIGNATURES........................................................................................................... 16
3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PEERLESS MFG. CO. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED)
March 31, June 30, 2001 2000 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 1,883 $ 561 Short term investments 297 273 Accounts receivable-principally trade-net 28,307 12,319 Inventories 2,766 3,288 Costs and earnings in excess of billings 7,191 9,912 Other 3,062 1,175 -------- -------- Total current assets 43,506 27,528 Property, plant and equipment-net 3,312 3,509 Other assets 759 1,083 -------- -------- $ 47,577 $ 32,120 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $ 7,016 $ 5,800 Accounts payable-trade 9,019 6,471 Current maturities of long-term debt 400 421 Billings in excess of costs and earnings 9,657 364 Commissions payable 1,537 985 Accrued liabilities and other 3,622 1,548 -------- -------- Total current liabilities 31,251 15,589 Long-term debt, net of current maturities 1,300 1,406 Deferred income taxes 376 376 Shareholders' equity: Common stock 1,475 1,467 Additional paid-in capital 2,760 2,692 Unamortized value of restricted stock grants (43) (71) Cumulative foreign currency translation adjustment (27) (148) Retained earnings 10,485 10,809 -------- -------- Total shareholders' equity 14,650 14,749 -------- -------- $ 47,577 $ 32,120 ======== ========
See accompanying notes to condensed consolidated financial statements. -1- 4 PEERLESS MFG. CO. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
Three Months Ended Nine Months Ended March 31, March 31, --------- --------- 2001 2000 2001 2000 -------- -------- -------- -------- Revenues $ 18,229 $ 13,764 $ 45,671 $ 36,429 Cost of goods sold 12,823 9,384 32,806 24,554 -------- -------- -------- -------- Gross profit 5,406 4,380 12,865 11,875 Operating expenses 4,350 3,445 11,888 9,833 -------- -------- -------- -------- Operating income 1,056 935 977 2,042 Other income (expense) Interest expense, net (199) 10 (614) (7) Foreign exchange gains (losses) (97) (25) (180) 38 Other, net (56) (44) (114) (70) -------- -------- -------- -------- (352) (59) (908) (39) -------- -------- -------- -------- Earnings (loss) before federal income tax 704 876 69 2,003 Federal income tax 260 314 25 716 -------- -------- -------- -------- Net earnings 444 562 44 1,287 ======== ======== ======== ======== Basic earnings per share $ 0.30 $ 0.38 $ 0.03 $ 0.88 ======== ======== ======== ======== Diluted earnings per share $ 0.30 $ 0.38 $ 0.03 $ 0.88 ======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements -2- 5 PEERLESS MFG. CO. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
Nine months ended March 31, --------- 2001 2000 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 44 $ 1,287 Adjustments to reconcile net earnings to cash provided by (used in) operating activities: Depreciation and amortization 288 331 Changes in assets and liabilities: Accounts receivable (15,988) (941) Inventories 522 334 Cost and earnings in excess of billings 2,721 (502) Other current assets (1,887) (2,431) Other assets 324 (133) Accounts payable 2,548 (617) Billings in excess of costs and earnings 9,293 2,236 Commissions payable 552 (329) Accrued liabilities 2,074 218 -------- -------- 447 (1,834) -------- -------- Net cash provided by (used in) operating activities 491 (547) CASH FLOWS FROM INVESTING ACTIVITIES: Net purchases of short-term investments (24) -- Net purchases of property and equipment (91) (1,742) -------- -------- Net cash used in investing activities (115) (1,742) CASH FLOWS FROM FINANCING ACTIVITIES: Net change in short-term borrowings 1,089 2,806 Proceeds from issuance of common stock 104 67 Dividends paid (368) (546) -------- -------- Net cash provided by financing activities 825 2,327 Effect of exchange rate changes on cash and cash equivalents 121 (75) -------- -------- Net increase (decrease) in cash and cash equivalents 1,322 (37) Cash and cash equivalents at beginning of period 561 211 -------- -------- Cash and cash equivalents at end period $ 1,883 $ 174 ======== ========
See accompanying notes to condensed consolidated financial statements. -3- 6 PEERLESS MFG. CO. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSAND, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1. BASIS OF PRESENTATION. These unaudited condensed consolidated financial statements of Peerless Mfg. Co. and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the company's annual report on Form 10-K for the fiscal year ended June 30, 2000. All significant intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. Operating results for the interim periods are not necessarily indicative of results that may be expected for the fiscal year ending June 30, 2001. Certain fiscal year 2000 items have been reclassified to conform with the fiscal year 2001 presentation. 2. EARNINGS PER SHARE. Basic earnings per share have been computed by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect the potential dilution that could occur if options or other contracts to issue common shares were exercised or converted into common stock. The following table presents the calculation of earnings per share for the periods indicated.
Three Months Ended Nine Months Ended March 31, March 31, --------- --------- 2001 2000 2001 2000 ------ ------ ------ ------ Net earnings $ 444 $ 562 $ 44 $1,287 ------ ------ ------ ------ Basic weighted average common shares outstanding 1,474 1,463 1,472 1,458 Effect of dilutive options 17 17 12 10 Diluted weighted average common ------ ------ ------ ------ shares outstanding 1,491 1,480 1,484 1,468 Net income per share - basic $ 0.30 $ 0.38 $ 0.03 $ 0.88 Net income per share - diluted 0.30 $ 0.38 $ 0.03 $ 0.88
The company did not exclude any outstanding stock options from its calculation of diluted earnings per share for the three and nine months ended March 31, 2001, or the three months ended March 31, 2000. However, the company excluded 8,500 outstanding stock options for the nine months ended March 31, 2000, because their impact would be anti-dilutive. -4- 7 PEERLESS MFG. CO. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSAND, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 3. COMPREHENSIVE INCOME. Comprehensive income is defined as the change in equity during a period from transactions or other events and circumstances from non-ownership sources. It includes all changes in equity during a period, except those resulting from investments by owners and distributions to owners. The components of comprehensive income were as follows:
Three Months Ended Nine Months Ended March 31, March 31, --------- --------- 2001 2000 2001 2000 ------- ------- ------- ------- Net earnings $ 444 $ 562 $ 44 $ 1,287 Foreign currency translation adjustment (14) (58) 121 (75) ------- ------- ------- ------- Comprehensive income $ 430 $ 504 $ 165 $ 1,212 ======= ======= ======= =======
4. SUPPLEMENTAL CASH FLOW INFORMATION. Net cash flow from operating activities reflects cash payments for interest and income taxes as follows:
Nine Months Ended March 31, --------- 2001 2000 ---- ---- Interest paid $449 $ 6 Income taxes paid $ 94 $ 76
5. USE OF ESTIMATES. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. -5- 8 PEERLESS MFG. CO. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSAND, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 6. INVENTORIES. Inventories are stated at the lower of cost or market. Principal components of inventories are as follows:
March 31, June 30, 2001 2000 ------ ------ Raw materials $1,585 $1,252 Work in process 529 1,669 Finished goods 652 367 ------ ------ Total inventories $2,766 $3,288 ====== ======
7. SEGMENT INFORMATION. The company has two reportable industry segments: (1) gas/liquid filtration; and (2) selective catalytic reduction systems. The gas/liquid filtration segment produces various types of separators and filters used for removing liquids and solids from gases and air. This segment also provides engineering design and services, pulsation dampeners, natural gas odorizers, quick-opening closures and parts for its products. The selective catalytic reduction systems segment produces "Selective Catalytic Reduction Systems (SCR)" used to separate nitrogen oxide (NOx) emissions from exhaust gases caused by burning hydrocarbon fuels such as coal, gasoline, natural gas and oil. The company combines these products with other components as totally integrated systems. Many of the company's components are packaged on skids complete with instruments, controls and related valves and piping. Segment profit and loss is based on revenue, less direct costs of the segment before allocation of general, administrative, research and development costs. There were no sales or transfers between segments. The company does not allocate assets, expenditures for assets or depreciation expense on a segment basis for internal management reporting and, therefore, such information is not presented. Segment information and a reconciliation to operating profit for the three and nine months ended March 31, 2001 and 2000 are presented below. -6- 9 PEERLESS MFG. CO. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSAND, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
Selective Catalytic Gas/Liquid Reduction Unallocated Filtration Systems Overhead Consolidated ---------- --------- ----------- ------------ THREE MONTHS ENDED MARCH 31, 2001 Revenues from customers $ 5,857 $ 12,372 $ -- $18,229 Segment profit (loss) 117 3,440 (2,501) 1,056 THREE MONTHS ENDED MARCH 31, 2000 Revenues from customers $ 6,086 $ 7,678 $ -- $13,764 Segment profit (loss) 735 2,402 (2,202) 935
Selective Catalytic Gas/Liquid Reduction Unallocated Filtration Systems Overhead Consolidated ---------- --------- ----------- ------------ NINE MONTHS ENDED MARCH 31, 2001 Revenues from customers $ 16,916 $ 28,755 $ -- $ 45,671 Segment profit (loss) 1,275 6,677 (6,975) 977 NINE MONTHS ENDED MARCH 31, 2000 Revenues from customers $ 22,286 $ 14,143 $ -- $ 36,429 Segment profit (loss) 4,361 3,964 (6,283) 2,042
Certain fiscal year 2000 items have been reclassified to conform with the fiscal year 2001 presentation. 8. BUSINESS COMBINATION. On February 25, 2000, the company purchased substantially all the assets of ABCO Industries, Inc. ("ABCO") for approximately $1.7 million. The ABCO acquisition was accounted for as a purchase and, accordingly, the condensed consolidated financial statements reflect the operations of the acquired entity since the acquisition date. ABCO is in the business of designing and manufacturing industrial boilers. The following unaudited proforma financial information presents the combined results of operations as if the ABCO acquisition had occurred at the beginning of fiscal year 2000, after giving effect to certain adjustments. The proforma results do not necessarily represent results which would have occurred if the ABCO transaction had taken place at the beginning of fiscal year 2000, nor are they indicative of the results of future combined operations. -7- 10 PEERLESS MFG. CO. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSAND, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
Three Months Ended Nine Months Ended March 31, 2000 March 31, 2000 ------------------ ------------------ Sales $ 17,838 $ 47,184 Net earnings before extraordinary credit 374 343 Per share-basic: Net earnings before extraordinary credit $ 0.26 $ 0.24 Per share-diluted: Net earnings before extraordinary credit $ 0.25 $ 0.23
9. CONTINGENCIES. The company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the company's consolidated financial position and results of operations, taken as a whole. -8- 11 PEERLESS MFG. CO. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS The company's fiscal year ends on June 30th. References herein to fiscal 2000 and fiscal 2001 refer to our fiscal years ended June 30, 2000 and 2001, respectively. The following table displays the company's statements of operations as a percentage of net revenues:
Three Months Ended Nine Months Ended March 31, March 31, --------- --------- 2001 2000 2001 2000 ------ ------ ------ ------ Net revenues 100.0% 100.0% 100.0% 100.0% Cost of revenues 70.3 68.2 71.8 67.4 ------ ------ ------ ------ Gross margin 29.7 31.8 28.2 32.6 Operating expenses 23.9 25.0 26.0 27.0 ------ ------ ------ ------ Operating income 5.8 6.8 2.2 5.6 Interest income (expense), net (1.1) 0.1 (1.3) (0.0) Other, net (0.8) (0.5) (0.7) (0.1) ------ ------ ------ ------ Earnings before income taxes 3.9 6.4 0.2 5.5 Income taxes 1.5 2.3 0.1 2.0 ------ ------ ------ ------ Net earnings 2.4% 4.1% 0.1% 3.5% ====== ====== ====== ======
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000 Net revenues increased $4.4 million, or 32%, to $18.2 million for the three months ended March 31, 2001, from $13.8 million for the three months ended March 31, 2000. The increase in revenues was attributable to the increased demand for our SCR products and integrated systems. Due to the new gas turbine powered electric generating facilities currently under construction in the United States to fill our country's demand for electricity, we anticipate the demand for our SCR products will continue to increase. These new generating facilities use clean burning gas, which in turn drives demand for our gas cleaning equipment. Coal fired electric power plants are also contributing to the stronger demand we are seeing for our SCR products. These products are necessary to insure compliance with the U.S. government's mandate for lower NOx emission levels. We provide ammonia storage and delivery systems to be used as part of the SCR systems to be installed at these coal fired plants. Our backlog of unfilled orders was approximately $65 million at March 31, 2001, as compared to approximately $39 million at March 31, 2000. The increase is primarily due to several significant SCR orders booked during the three months ended March 31, 2001. -9- 12 PEERLESS MFG. CO. AND SUBSIDIARIES Our gross profit increased $1.0 million, or 23.0%, to $5.4 million for the three months ended March 31, 2001, compared to $4.4 million for the same period a year ago. Gross profit, as a percentage of sales, decreased to 29.7% for the current quarter from 31.8% a year ago. The lower gross margin was primarily due to the additional costs associated with the increased manufacturing capacity acquired in early 2000, along with the lower margin recognized on SCR revenues. Operating expenses increased by $0.9 million, or 26.0%, to $4.3 million for the three months ended March 31, 2001, compared to $3.4 million for the three months ended March 31, 2000. The increase in operating expenses was primarily due to costs associated with the ABCO acquisition and additional costs of engineering and project management required for the increased SCR activities. Operating expenses decreased as a percentage of sales to 23.9%, compared to 25.0% for the same period last year. Interest expense increased by $0.2 million due to increased debt incurred to finance our working capital needs and as a result of the financing required to acquire the ABCO operations. As a result of the factors discussed above, we recorded net earnings for the quarter ended March 31, 2001, of $0.4 million compared to net earnings of $0.6 million for the same period a year ago. NINE MONTHS ENDED MARCH 31 2001 COMPARED TO NINE MONTHS ENDED MARCH 31, 2000 Net revenues increased $9.3 million, or 26.0%, to $45.7 million for the nine months ended March 31, 2001, compared to $36.4 million for the same period a year ago. The increase in revenues was attributable to the increased demand for our SCR products and integrated systems. Our gross profit increased $1.0 million, or 8%, to $12.9 million for the nine months ended March 31, 2001, compared to $11.9 million for the same period a year ago. Gross profit as a percentage of sales decreased to 28.2% for the nine months ended March 31, 2001, from 32.6% a year ago. The lower gross margin was primarily due to the additional costs associated with the increased manufacturing capacity acquired in early 2000, along with the lower margin recognized on SCR revenues. Operating expenses increased by $2.1 million, or 21%, to $11.9 million for the nine months ended March 31, 2001, compared to $9.8 million for the nine months ended March 31, 2000. The increase in operating expenses was primarily due to costs associated with the ABCO acquisition and additional costs of engineering and project management required for the increased SCR activities. Operating expenses decreased as a percentage of sales to 26.0%, compared to 27.0% for the same period last year. Interest expense increased by $0.6 million due to increased debt incurred to finance our working capital needs and as a result of the financing required to acquire the ABCO operations. As a result of the factors discussed above, net earnings for the nine months ended March 31, 2001 was $44 thousand compared to net earnings of $1.3 million for the same period a year ago. LIQUIDITY AND CAPITAL RESOURCES We maintain two separate short-term lines of credit, each in the amount of $5.5 million. In addition, we have an installment note payable that was utilized to finance the ABCO acquisition. -10- 13 PEERLESS MFG. CO. AND SUBSIDIARIES The credit lines currently expire in August 2001. The credit lines currently carry a floating interest rate based on the prime rate (8.0% at March 31, 2001) plus 2.50 percent and are secured by substantially all of our assets. Prior to January 31, 2001, the credit lines carried a floating interest rate at prime. As of March 31, 2001, we had $7.0 million outstanding under the credit lines, and $2.2 million outstanding under letters of credit, leaving us with $1.7 million of availability under the credit lines. We pay an annual commitment fee of 0.25% of the unused balance under the credit lines. The credit lines contain customary financial covenants, including a restriction on the payment of dividends in the event of a default. We intend to refinance the lines of credit prior to the end of August 2001, though there can be no assurance that the refinanced banking arrangements will be at the same terms and conditions as the existing lines of credit. We completed the ABCO acquisition in February 2000, which was financed with a 5 year term note in the original principal amount of $2.0 million. The term note is being repaid with equal quarterly principal installments plus accrued interest. The assets acquired by the company in the ABCO acquisition secure the term note. The note is due June 30, 2005 and currently bears interest at the bank's prime rate (8.0% at March 31, 2001) plus 2.5 percent. Prior to January 31, 2001, the interest rate was at prime. The balance on the term note as of March 31, 2001 was $1.7 million. We have historically been a net user of cash from operations and have financed our working capital requirements and capital expenditures through the retention of earnings and the use of our short-term credit lines. Cash provided by operating activities was $0.5 million for the first nine months of fiscal 2001 compared to cash used in operating activities of $0.5 million for the same period in fiscal 2000. The change was primarily the result of the increases in billings in excess of cost and earnings, accounts payable and accrued liabilities which were offset by the increased accounts receivable. We believe we maintain adequate liquidity to support existing operations and planned growth, as well as to continue operations during reasonable periods of unanticipated adversity. Management directs additional resources to strategic new product development, market expansion and continuing improvement of existing products to enhance our position as a market leader and to promote planned internal growth and profitability. Although historically the company has usually paid quarterly dividends in January 2001, we announced that we would not pay a dividend for the quarter ending March 31, 2001, in order to preserve working capital for future growth. We have decided to continue the policy of preserving working capital for the quarter ending June 30, 2001. Consequently, no dividend will be paid for that quarter. CAUTION REGARDING FORWARD-LOOKING STATEMENTS The company occasionally makes forward-looking statements concerning its plans, goals, product and service offerings, and anticipated financial performance. These forward-looking statements may generally be identified by introductions such as "outlook" for an upcoming period of time, or words and phrases such as "should", "expect", "hope", "plans", "projected", "believes", "forward-looking" (or variants of those words and phrases) or similar language indicating the expression of an opinion or view concerning the future. These forward-looking statements are subject to risks and uncertainties based on a number of factors and actual results or events may differ materially from those anticipated by such forward-looking statements. These factors include, but are not limited to: the growth rate of the company's revenue and market share; the consummation of new, and the non-termination of, existing contracts; the company's ability to effectively manage its business functions while growing its -11- 14 PEERLESS MFG. CO. AND SUBSIDIARIES business in a rapidly changing environment; the company's ability to adapt and expand its services in such an environment; the company's ability to successfully refinance or extend its lines of credit or obtain alternative sources of financing; the effective and efficient management of the company's backlog, inventory levels and processing of sales orders; the quality of the company's plans and strategies; and the company's ability to execute such plans and strategies. In addition, forward-looking statements concerning the company's expected revenue or earnings levels are subject to many additional uncertainties applicable to competitors generally and to general economic conditions over which the company has no control. The company does not plan to generally publicly update prior forward-looking statements for unanticipated events or otherwise and, accordingly, prior forward-looking statements should not be considered to be "fresh" simply because the company has not made additional comments on those forward-looking statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Our earnings are affected by changes in interest rates due to the impact those changes have on the interest expense payable by us under our variable rate debt revolving line of credit and installment debt, for which the outstanding balances were $8.7 million as of March 31, 2001. A 1.0% change in the underlying prime rate would result in a $87,000 change in the annual amount of interest based on the impact of the hypothetical interest rates on our revolving line of credit outstanding as of March 31, 2001. -12- 15 PEERLESS MFG. CO. AND SUBSIDIARIES PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. During the three and six month periods ended March 31, 2001, options to acquire 3,000 and 6,500 shares, respectively, were exercised under terms of the company's stock option plan. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. A. Exhibits. The following exhibits are filed as part of this report: Exhibit Number Exhibit - ------ ------- 3(a) Articles of Incorporation, as amended to date (filed as Exhibit 3(a) to our Quarterly Report on Form 10-Q, for the fiscal quarter ended December 31, 1997, and incorporated herein by reference). 3(b) Bylaws, as amended to date (filed as Exhibit 3(b) to our Annual Report on Form 10-K, for the fiscal year ended June 30, 1997, and incorporated herein by reference). 10(a) Incentive Compensation Plan effective January 1, 1981, as amended January 23, 1991 (filed as Exhibit 10(b) to our Annual Report on Form 10-K, for the fiscal year ended June 30, 1991, and incorporated herein by reference). 10(b) 1985 Restricted Stock Plan for Peerless Mfg. Co., effective December 13, 1985 (filed as Exhibit 10(b) to our Annual Report on Form 10-K, for the fiscal year ended June 30, 1993, and incorporated herein by reference). 10(c) 1991 Restricted Stock Plan for Non-Employee Directors of Peerless Mfg. Co. (filed as Exhibit 10(e) to our Annual Report on Form 10-K for the fiscal year ended June 30, 1991, and incorporated herein by reference). 10(d) Employment Agreement, dated as of April 29, 1994, by and between Peerless Mfg. Co. and Sherrill Stone (filed as Exhibit 10(d) to our Annual Report on Form 10-K for the fiscal year ended June 30, 1994, and incorporated herein by reference). 10(e) Eighth Amended and Restated Loan Agreement, dated as of December 12, 1999, between Bank of America N.A., formerly NationsBank of Texas, N.A., and Peerless Mfg. Co. (filed as Exhibit 10(f) to our Quarterly Report on Form 10-Q, for the fiscal quarter ended December 31, 1999, and incorporated herein by reference), as amended by Amendment A thereto, dated February 25, 2000 (filed as Exhibit 10(f) to our Annual Report on Form 10-K for the fiscal year ended June 30, 2000, and incorporated herein by reference). 10(f) Second Amended and Restated Loan Agreement, dated as of December 12, 1999, and Waiver and First Amendment to Second Amended and Restated Loan Agreement dated December 12, 1999, by and between Chase Bank of Texas N.A, and Peerless Mfg. Co. (filed as Exhibit 10(g) to our Quarterly Report on Form 10-Q, for the fiscal quarter ended December 31, 1999, and incorporated herein by reference). -13- 16 PEERLESS MFG. CO. AND SUBSIDIARIES 10(g) Peerless Mfg. Co. 1995 Stock Option and Restricted Stock Plan (filed as Exhibit 10(h) to our Annual Report on Form 10-K for the fiscal year ended June 30, 1997 and incorporated herein by reference), as amended by Amendment #1 dated November 11, 1999 (filed as exhibit 10(h) to our Quarterly Report on Form 10-Q, for the fiscal quarter ended December 31, 1999 and incorporated herein by reference). 10(h) Rights Agreement between Peerless Mfg. Co. and ChaseMellon Shareholder Services, L.L.C., adopted by the Board of Directors May 21, 1997 (filed as Exhibit 1 to our Registration Statement on Form 8-A (File No. 0-05214) and incorporated herein by reference). 10(i) Term Note with Bank of America dated May 30, 2000 by and between Bank of America, N.A. and Peerless Mfg. Co. (filed as Exhibit 10(m) to our Annual Report on Form 10-K for the fiscal year ended June 30, 2000, and incorporated herein by reference). 10(j) Amendment and Waiver to Credit Agreement dated as of December 1, 2000, by and between Peerless Mfg. Co. and The Chase Manhattan Bank (filed as Exhibit 10(j) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 10(k) Amendment C to Eighth Amended and Restated Loan Agreement dated November 30, 2000, between Bank of America, N.A. and Peerless Mfg. Co. (filed as Exhibit 10(k) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 10(l) Second Note Modification Agreement dated December 12, 2000, between Bank of America, N.A., and Peerless Mfg. Co. (filed as Exhibit 10(l) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 10(m) Intercreditor Agreement dated November 30, 2000, among Bank of America, N.A., The Chase Manhattan Bank and Peerless Mfg. Co. (filed as Exhibit 10(m) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 10(n) Security Agreement dated November 30, 2000, between Bank of America, N.A. and Peerless Mfg. Co. (filed as Exhibit 10(n) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 10(o) Deed of Trust dated November 30, 2000, granted by Peerless Mfg. Co. in favor of Bank of America, N.A. (filed as Exhibit 10(o) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 10(p) Renewal Line of Credit Note dated January 31, 2001, executed by Peerless Mfg. Co. payable to Bank of America, N.A. in the stated principal amount of $5,500,000 (filed as Exhibit 10(p) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 10(q) Note Modification Agreement dated January 31, 2001, between PMC Acquisition, Inc. d/b/a ABCO Industries and Bank of America, N.A. (filed as Exhibit 10(q) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). -14- 17 PEERLESS MFG. CO. AND SUBSIDIARIES 10(r) Amendment D to Eighth Amended and Restated Loan Agreement dated January 31, 2001, between Bank of America, N.A. and Peerless Mfg. Co. (filed as Exhibit 10(r) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 10(s) Waiver and Fifth Amendment to Second Amended and Restated Loan Agreement dated January 31, 2001, between The Chase Manhattan Bank and Peerless Mfg. Co. (filed as Exhibit 10(s) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 10(t) Fourth Amended and Restated Promissory Note dated January 31, 2001, executed by Peerless Mfg. Co. payable to The Chase Manhattan Bank in the stated principal amount of $5,500,000 (filed as Exhibit 10(t) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 21 Our Subsidiaries (filed as Exhibit 21 to our Annual Report on Form 10-K for the fiscal year ended June 30, 2000, and incorporated herein by reference). - ---------- B. Reports on Form 8-K. None. -15- 18 PEERLESS MFG. CO. AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. PEERLESS MFG. CO. Dated: May 11, 2001 /s/ Sherrill Stone --------------------------------------------- Sherrill Stone, Chairman, President and Chief Executive Officer /s/ Robert J. Boutin --------------------------------------------- Robert J. Boutin, Chief Financial Officer (Principal Financial and Accounting Officer) -16- 19 PEERLESS MFG. CO. AND SUBSIDIARIES EXHIBIT INDEX
Exhibit Number Exhibit - ------ ------- 3(a) Articles of Incorporation, as amended to date (filed as Exhibit 3(a) to our Quarterly Report on Form 10-Q, for the fiscal quarter ended December 31, 1997, and incorporated herein by reference). 3(b) Bylaws, as amended to date (filed as Exhibit 3(b) to our Annual Report on Form 10-K, for the fiscal year ended June 30, 1997, and incorporated herein by reference). 10(a) Incentive Compensation Plan effective January 1, 1981, as amended January 23, 1991 (filed as Exhibit 10(b) to our Annual Report on Form 10-K, for the fiscal year ended June 30, 1991, and incorporated herein by reference). 10(b) 1985 Restricted Stock Plan for Peerless Mfg. Co., effective December 13, 1985 (filed as Exhibit 10(b) to our Annual Report on Form 10-K, for the fiscal year ended June 30, 1993, and incorporated herein by reference). 10(c) 1991 Restricted Stock Plan for Non-Employee Directors of Peerless Mfg. Co. (filed as Exhibit 10(e) to our Annual Report on Form 10-K for the fiscal year ended June 30, 1991, and incorporated herein by reference). 10(d) Employment Agreement, dated as of April 29, 1994, by and between Peerless Mfg. Co. and Sherrill Stone (filed as Exhibit 10(d) to our Annual Report on Form 10-K for the fiscal year ended June 30, 1994, and incorporated herein by reference). 10(e) Eighth Amended and Restated Loan Agreement, dated as of December 12, 1999, between Bank of America N.A., formerly NationsBank of Texas, N.A., and Peerless Mfg. Co. (filed as Exhibit 10(f) to our Quarterly Report on Form 10-Q, for the fiscal quarter ended December 31, 1999, and incorporated herein by reference), as amended by Amendment A thereto, dated February 25, 2000 (filed as Exhibit 10(f) to our Annual Report on Form 10-K for the fiscal year ended June 30, 2000, and incorporated herein by reference). 10(f) Second Amended and Restated Loan Agreement, dated as of December 12, 1999, and Waiver and First Amendment to Second Amended and Restated Loan Agreement dated December 12, 1999, by and between Chase Bank of Texas N.A, and Peerless Mfg. Co. (filed as Exhibit 10(g) to our Quarterly Report on Form 10-Q, for the fiscal quarter ended December 31, 1999, and incorporated herein by reference). 10(g) Peerless Mfg. Co. 1995 Stock Option and Restricted Stock Plan (filed as Exhibit 10(h) to our Annual Report on Form 10-K for the fiscal year ended June 30, 1997 and incorporated herein by reference), as amended by Amendment #1 dated November 11, 1999 (filed as Exhibit 10(h) to our Quarterly Report on Form 10-Q, for the fiscal quarter ended December 31, 1999 and incorporated herein by reference). 10(h) Rights Agreement between Peerless Mfg. Co. and ChaseMellon Shareholder Services, L.L.C., adopted by the Board of Directors May 21, 1997 (filed as Exhibit 1 to our
20 PEERLESS MFG. CO. AND SUBSIDIARIES Registration Statement on Form 8-A(File No. 0-05214) and incorporated herein by reference). 10(i) Term Note with Bank of America dated May 30, 2000 by and between Bank of America, N.A. and Peerless Mfg. Co. (filed as Exhibit 10(m) to our Annual Report on Form 10-K for the fiscal year ended June 30, 2000, and incorporated herein by reference). 10(j) Amendment and Waiver to Credit Agreement dated as of December 1, 2000, by and between Peerless Mfg. Co. and The Chase Manhattan Bank (filed as Exhibit 10(j) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 10(k) Amendment C to Eighth Amended and Restated Loan Agreement dated November 30, 2000, between Bank of America, N.A. and Peerless Mfg. Co. (filed as Exhibit 10(k) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 10(l) Second Note Modification Agreement dated December 12, 2000, between Bank of America, N.A., and Peerless Mfg. Co. (filed as Exhibit 10(l) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 10(m) Intercreditor Agreement dated November 30, 2000, among Bank of America, N.A., The Chase Manhattan Bank and Peerless Mfg. Co. (filed as Exhibit 10(m) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 10(n) Security Agreement dated November 30, 2000, between Bank of America, N.A. and Peerless Mfg. Co. (filed as Exhibit 10(n) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 10(o) Deed of Trust dated November 30, 2000, granted by Peerless Mfg. Co. in favor of Bank of America, N.A. (filed as Exhibit 10(o) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 10(p) Renewal Line of Credit Note dated January 31, 2001, executed by Peerless Mfg. Co. payable to Bank of America, N.A. in the stated principal amount of $5,500,000 (filed as Exhibit 10(p) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 10(q) Note Modification Agreement dated January 31, 2001, between PMC Acquisition, Inc. d/b/a ABCO Industries and Bank of America, N.A. (filed as Exhibit 10(q) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 10(r) Amendment D to Eighth Amended and Restated Loan Agreement dated January 31, 2001, between Bank of America, N.A. and Peerless Mfg. Co. (filed as Exhibit 10(r) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference).
21 PEERLESS MFG. CO. AND SUBSIDIARIES 10(s) Waiver and Fifth Amendment to Second Amended and Restated Loan Agreement dated January 31, 2001, between The Chase Manhattan Bank and Peerless Mfg. Co. (filed as Exhibit 10(s) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 10(t) Fourth Amended and Restated Promissory Note dated January 31, 2001, executed by Peerless Mfg. Co. payable to The Chase Manhattan Bank in the stated principal amount of $5,500,000 (filed as Exhibit 10(t) to our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, and incorporated herein by reference). 21 Our Subsidiaries (filed as Exhibit 21 to our Annual Report on Form 10-K for the fiscal year ended June 30, 2000, and incorporated herein by reference).
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